MNI BRIEF: BOJ Ups FY21 CPI View But Lowers FY21 GDP

The Bank of Japan board upgraded its forecast for inflation rate this fiscal year to +0.6% from +0.1% made in April in the wake of higher energy prices, the Outlook Report released on Friday showed.

But the median inflation rate forecast in fiscal 2022 was also raised to +0.9% from April's +0.8%.

The board's median forecast for inflation rate in fiscal 2023 was unchanged at +1.0%, meaning Japan will not likely hit the 2% target after Governor Haruhiko Kuroda's second five-year terms ends on April 8, 2023.

The BOJ also left its assessment on inflation rate, saying, "Inflation expectations have been more or less unchanged."

GROWTH, RISK

As for the median real economic growth forecast, the board lowered the GDP forecast this fiscal year to +3.8% from April's +4.0% due to weaker spending caused by the state of emergency.

The median GDP forecast in fiscal 2022 was raised to +2.7% from +2.4% made in April and the GDP forecast in fiscal 2023 was unchanged at +1.3%.

The BOJ largely maintained the economic assessment, saying, "Although the level of Japan's economic activity, mainly in the face-to-face services sector, is expected to be lower than that prior to the pandemic for the time being, the economy is likely to recover."

"As the impact (of coronavirus) subsides, it (the economy) is projected to continue growing with a virtuous cycle from income to spending intensifying," the BOJ said.

With regard to the risk balance, the BOJ said, "Risks to economic activity are skewed to the downside for the time being, mainly due to the impact of Covid-19, but are generally balanced for the middle of the projection period onward." It also said, "Risks to prices are skewed to the downside."